Massachusetts Healthcare Spending Highest in the Nation

Health care spending in Massachusetts is the highest in the nation, at 36 percent above the national average.

“There's no question we have to get our costs under control,” said John O'Brien, distinguished professor of higher education at the Mosakowski Institute for Public Enterprise at Clark University.

While the benchmark cost of health insurance in the Bay State is similar to others in New England — higher than New Hampshire, but comparable to Connecticut and Maine and far below Vermont according to a new analysis of insurance premiums — total per capita personal health care expenditures totaled $9,278 in Massachusetts versus $6,815 across the rest of the U.S.

The latest corroborating evidence of Massachusetts' high rate of spending comes from a report out this week by the state Health Policy Commission, established in 2012 through the health care cost containment law known as Chapter 224.

Although costly, the state does continue to lead in key health indicators.

Key factors include high utilization

The immediate past president and chief executive officer of UMass Memorial Health Care, a position he held for 10 years, O'Brien said there were several factors driving the cost of health care in the state.

He pointed to a large array of teaching hospitals (47 percent of discharges were in major teaching hospitals according to the commission report), high utilization of health care and new technology, and expensive labor inputs given the cost of living and competition for resources.

“If you look at our labor costs, they're right up there with the highest in the country,” O'Brien said. Additionally, “we're significant consumers of health care.”

“Utilization in this state is higher than in the rest of the country and it's something we need to get a hold on, because it's excessive.”

The commission's report finds hospital utilization is high throughout the state, with inpatient admissions 10 percent above the national average and outpatient visits (excluding emergency care) a staggering 72 percent above average.

However, the commission's report did estimate that spending had flattened since 2009, mirroring the national trend and growing at a slower rate (3.2 percent) than overall economic growth.

At the time of his appointment, Stuart Altman, the commission's chair, said in a release that addressing cost growth was a “critically important” challenge for the state.

Solutions including changing incentives for providers

Paradoxically, part of the state's high spending can be attributed to past reform resulting in a high level of insured residents — 96 percent — a figure touted by state Office of Health and Human Services officials like Julie Kaviar, who said this week that residents not only had health insurance, but used it to get the health care they need.

Similar to the federal Affordable Care Act, Massachusetts' reform law of 2006 did not directly address cost containment. (And the commission's recent report doesn't consider the latent effects of 2012's Chapter 224.)

But overall, “I don't think reform by definition is contributing in a significant way to increased costs,” O'Brien said. Instead, he sees state and federal reforms helping to control costs as the system turns to incentivizing healthy outcomes.

“We're going through a paradigm shift,” he continued. “The bottom line on this is that through health care reform, we're moving toward an alternative payment methodology.”

The state's largest insurer, Blue Cross/Blue Shield of Massachusetts, recently devised a program where doctor networks are paid a flat amount per patient, discouraging the traditional so-called fee-for-service medicine.

Derek Brindisi, a member of the Massachusetts Public Health Council and director of public health in Worcester, maintains the greater emphasis on preventative care will defray costs while at the same time improving outcomes.

Cost containment: Chapter 224

A recent report by Northeastern University's Institute on Urban Health Research and Practice hailed Chapter 224 as the “most significant” step since the state's landmark 2006 reform.

“It's a very ambitious bill,” said John Auerbach, one of that report's authors. “We'll have to find out (if the measures have their intended effect),” he said this week, to “help create policy to bend the cost curve down.”

In addition to the state commission and a goal of pegging health costs to economic growth, Chapter 224 also established a Prevention and Wellness Trust Fund that will invest $60 million over four years into evidence-based community prevention.

To be awarded through a competitive grant process, the majority of those funds must go toward reducing rates of the state's most costly preventable health conditions, reducing health disparities, and increasing healthy behaviors and workplace-based wellness programs.

But that investment is minuscule compared to overall spending.

Much more dramatic savings will come, O'Brien says, from controlling premiums and hospital prices and changing financial incentives.

Meanwhile, health care reform has had the “rational” effect of covering more individuals under health insurance, according to O'Brien, as access to care is something everyone needs. “There's no such thing as free care.”

Related Slideshow: New England’s Healthiest States

The United Health Foundation recently released its 2013 annual reoprt: America's Health Rankings, which provides a comparative state by state analysis of several health measures to provide a comprehensive perspective of our nation's health issues. See how the New England states rank in the slides below.

Definitions

All Outcomes Rank: Outcomes represent what has already occurred, either through death, disease or missed days due to illness. In America's Health Rankings, outcomes include prevalence of diabetes, number of poor mental or physical health days in last 30 days, health disparity, infant mortality rate, cardiovascular death rate, cancer death rate and premature death. Outcomes account for 25% of the final ranking.

Determinants Rank: Determinants represent those actions that can affect the future health of the population. For clarity, determinants are divided into four groups: Behaviors, Community and Environment, Public and Health Policies, and Clinical Care. These four groups of measures influence the health outcomes of the population in a state, and improving these inputs will improve outcomes over time. Most measures are actually a combination of activities in all four groups.

Diabetes Rank: Based on percent of adults who responded yes to the question "Have you ever been told by a doctor that you have diabetes?" Does not include pre-diabetes or diabetes during pregnancy.

Smoking Rank: Based on percentage of adults who are current smokers (self-report smoking at least 100 cigarettes in their lifetime and currently smoke).

Obesity Rank: Based on percentage of adults who are obese, with a body mass index (BMI) of 30.0 or higher.